Nov. is the worst month for Wal-Mart in 10 years

Forget the critics, labor unions, activists and politicians who have tried to stir up trouble for Wal-Mart Stores Inc. The company's latest problems come from a far more serious quarter: consumers.

Despite hundreds of price cuts to lure early-bird Christmas shoppers, November was Wal-Mart's worst month in a decade, with sales dipping below last year's levels. And December isn't expected to be much better.

"The good old days are over," said Mark Husson, an analyst with HSBC Securities in New York. "And some people in the market don't seem to be able to accept that [Wal-Mart] is not going to go back to the rates of growth it used to enjoy."

Wall Street's Wal-Mart believers say this is the time to buy, noting that the stock has essentially stagnated since a peak in 1999, while earnings have more than doubled.

The company is on track to post annual sales of more than $350 billion and profit of close to $12 billion this year.

But limping sales at the company's established stores for most of 2006 tell some analysts that investors have good reason to be wary: How can the biggest retailer on Earth turn around sales and continue to grow?

"Nobody has ever been this big, so it's impossible to say," said Bob Buchanan, an analyst at A.G. Edwards & Sons Inc. in St. Louis who rates the stock a "hold."

"Retailing is all about momentum, and that's especially true for a company doing $350 billion in sales. There's not going to be a quick fix here."

For years, Wal-Mart was able to post month after month of high-flying sales, delivering impressive earnings growth, often better than 15 percent annually. By undercutting competitors with its "every day low prices," the company was able to quickly expand its store base, yielding greater total sales gains.

The company has more than 6,600 stores worldwide - nearly 4,000 in the United States.

Wal-Mart's sales troubles come while other retailers' cash registers are ringing loudly - the opposite of what has occurred for much of the last 10 years.

For the year, Wal-Mart has an average monthly same-store sales gain of 2.4 percent, compared with 4.8 percent for Target and 6.9 percent for Kohl's Corp., according to the International Council of Shopping Centers.

Offering value

"I think what was incredibly important for Wal-Mart in the '90s was that they would always beat on price," said Adrian D'Ambrosi, an analyst for Lord Abbett & Co.'s Large-Cap Growth Fund. "A lot of retailers have learned they don't have to compete with Wal-Mart on price anymore, they just have to offer better value."

For most of the year, Wal-Mart chief executive H. Lee Scott Jr. has blamed macroeconomic forces for the company's woes, noting that its core lower-income consumers were particularly hard hit by soaring gas prices.

But in the fall, when gas prices stabilized and the rest of the retail industry rallied, Wal-Mart continued to suffer. Scott was forced to acknowledge other problems.

Next year, Wal-Mart's problems ought to be in the rear-view mirror, Hawley said: store remodeling will be complete, sales comparisons will be easier, the bad fashion will be cleared out. And the price rollbacks will be in full force.

"Once all those things get finished, then we better start seeing a change," Hawley said. "If that doesn't happen, I'm sure the catcalls will come fast and furious."